Writing shading programs is a common task when developing 3D based application. Most of the visual effects used by 3D based applications involve shader programs. Additionally with D3D11, support for fixed pipeline functionality was removed. Meaning you can only render objects using shaders.

While High-level Programs offer you maximal control and flexibility over how your objects are rendered, writing and maintaining them is also a very time consuming task.

Instead Ogre can also automatically generate shaders on the fly, based on object material properties, scene setup and other user definitions. While the resulting shaders are less optimized, they offer the following advantages:

Save development time e.g. when your target scene has dynamic lights and the number changes, fog changes and the number of material attributes increases the total count of needed shaders dramatically. It can easily cross 100 and it becomes a time consuming development task.
Reusable code - once you've written the shader extension you can use it anywhere due to its independent nature.
Custom shaders extension library - enjoy the shared library of effects created by the community. Unlike hand written shader code, which may require many adjustments to be plugged into your own shader code, using the extensions library requires minimum changes.

You have the choice between two different systems, which are implemented as components. You can select the one you need (or disable both) at compile time.

RTSS: Run Time Shader System
The RTSS is not another Uber shader with an exploding amount of #ifdefs that make it increasingly difficult to add new functionality. Instead, it manages a set of opaque isolated components (SubRenderStates) where each implements a specific effect. These "effects" notable include full Fixed Function emulation. At the core these components are plain shader files providing a set of functions. The shaders are based on properties defined in Material Scripts.
HLMS: High Level Material System
This component allows you to manage shader variations of a specific shader template. This is a different take to the Uber shader management, but instead of using plain #ifdefs it uses a custom, more powerful preprocessor language. Currently the HLMS can be only configured via a custom API and does not respect classical Ogre::Material properties.

Historical background

When the early graphic cards came into the market they contained a fixed but large set of functions with which you could influence how 3D object were rendered. These included influencing object positions using matrices, calculating the effect of textures on a pixel, calculating the effect of lights on vertices and so on. These set of functions and their implementation in hardware became later known as the graphic card fixed pipeline (or Fixed Function Pipeline).

As graphic cards became more powerful and graphic application became more complex, a need for new ways to manipulate the rendering of 3D models became apparent. This need saw the introduction of shaders.

Shaders are small custom made programs that run directly on the graphics card. Using these programs, one could replace the calculations that were made by the fixed pipeline and add new functionality. However there was a catch: If shaders are used on an object, the object can no longer use any of the functionality of the fixed pipeline. Any calculation that was used in the fixed pipeline needed to be recreated in the shaders. With early graphics applications this was not problematic. Shaders were simple and their numbers were kept low. However as applications grew in complexity this meant that the need for shaders grew as well. As a programmer you were left with 2 choices, both bad. Either create an exuberant amount of small shaders that soon became too many to effectively maintain. Or create an uber shader, a huge complex shader, that soon became too complex to effectively maintain as well.

The RTSS seeks to fix those problems by automatically generating shaders based on the operations previously required from the fixed pipeline and new capabilities required by the user.

With the introduction of the version 11 of Direct3D, a new reason for having an RTSS like system became apparent. With D3D11 support for fixed pipeline functionality was removed. Meaning, you can only render objects using shaders. The RTSS is an excellent tool for this purpose.